Why Does Treasury Secretary Bessent Want to Keep Long-Term Interest Rates Down? The Limits of Policy as Shown by the U.S. Treasury Market
When U.S. long-term interest rates rise, they affect everything from mortgages and corporate financing to the stock market and investment plans for AI-related companies.
That is why, in order to understand the U.S. financial market, it is meaningful to pay attention not only to the Fed but also to Treasury Secretary Scott Bessent.
On October 15, 2026, the U.S. 10-year Treasury yield fell by approximately 10 basis points from the previous day, closing at around 5.09%.
The backdrop was a sell-off in technology stocks, particularly AI and semiconductor-related stocks, and a shift of funds into U.S. Treasuries, which are considered safe assets.
What is interesting is that long-term interest rates fell significantly even though inflation indicators exceeded market expectations.
Normally, if inflation is strong, there is an awareness of future monetary tightening or a prolonged period of high interest rates, which tends to put upward pressure on Treasury yields.
However, this time, anxiety in the stock market prompted an inflow of funds into government bonds.
Looking at this movement, one question arises.
If the U.S. Treasury Department cannot lower long-term interest rates as intended even when it works to stabilize the government bond market, what is happening in the U.S. financial market?
I believe that in considering this issue, it is important to look at Treasury Secretary Bessent’s policies and the market structure that influences those policies as a set.
1. Why are long-term interest rates so important?
The U.S. 10-year Treasury yield is one of the key benchmark interest rates in the global financial market.
It influences the pricing of various financial products, including mortgages, corporate borrowing rates, stock valuations, and corporate bond yields.
For AI-related companies in particular, a rise in long-term interest rates cannot be ignored.
AI development and operation require massive investments in semiconductors, data centers, power facilities, and networks.
If capital investment is financed through borrowing, an increase in funding costs could worsen investment profitability.
Furthermore, companies that incorporate future profit growth are more susceptible to the impact of rising interest rates on stock valuations.
Of course, just because interest rates rise does not mean that AI technological innovation will stop.
However, having superior technology and being able to profit from buying stocks related to that technology at a high price are two different things.
This is where understanding the movement of long-term interest rates becomes important.
2. What is Treasury Secretary Bessent Doing?
One policy to pay attention to when considering Treasury Secretary Bessent is the buyback of U.S. Treasury bonds.
On August 19, 2026, the U.S. Treasury Department announced a plan to increase the scale of buybacks intended to support the liquidity of long-term government bonds from the previous maximum of $2 billion to at least $4 billion per operation.
The targets are mainly long-term bonds with maturities of 10 to 30 years, and the changes were planned to be applied to the funding period from September 9 to November 4.
Source: Official announcement from the U.S. Treasury Department
What we should note here is the purpose of the government bond buybacks.
Mr. Bessent explains this measure as an effort to support the liquidity of older government bonds that have become difficult to trade in the market.
In other words, the Treasury Department buying back government bonds from the market is not the same as fixing long-term interest rates at a certain level.
Even so, there is significance in improving the trading environment of the government bond market and suppressing supply and demand disruptions.
So, why have long-term interest rates continued to rise?
In the background, there are multiple factors such as inflation, the fiscal deficit, the supply of government bonds, and the additional yield that investors demand for holding long-term bonds.
Even if the Treasury Department improves market liquidity, it cannot resolve all of these factors.
3. What the Interest Rate Decline on October 15 Indicated
In the market on October 15, a decline in technology stocks and a drop in U.S. Treasury yields occurred simultaneously.
Market reports suggest that doubts about growth expectations for AI-related companies and caution regarding the debt supporting AI infrastructure investment led to a cautious stance among investors.
Source: Financial Times “Treasuries rally as investors seek shelter from AI turbulence”
Investors who found it difficult to take risks in the stock market moved their funds into U.S. Treasury bonds.
As a result, it is thought that government bond prices rose and yields fell.
There is an important paradox here.
Inflation is strong, and concerns about fiscal policy remain. Even so, when anxiety about the stock market rises, long-term interest rates can fall.
However, it is not possible to conclude that the upward trend in long-term interest rates has ended based solely on this recent decline.
It is necessary to distinguish between temporary demand for safe-haven assets due to falling stock prices and the medium- to long-term upward pressure on interest rates caused by inflation and government bond supply.
I believe this distinction is crucial for investors analyzing AI-related stocks.
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